NBER Publications by Taylor D. Nadauld

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Working Papers and Chapters

August 2012Did Capital Requirements and Fair Value Accounting Spark Fire Sales in Distressed Mortgage-Backed Securities?
with Craig B. Merrill, René M. Stulz, Shane Sherlund: w18270
Much attention has been paid to the large decreases in value of non-agency residential mortgage-backed securities (RMBS) during the financial crisis. Many observers have argued that the fall in prices was partly driven by decreased liquidity and fire sales. We investigate whether capital requirements and accounting rules at financial institutions contributed to the selling of RMBS at fire sale prices. For financial institutions subject to credit-sensitive capital requirements, capital requirements increase as an asset’s credit becomes impaired. When accounting rules require such an asset’s value to be marked-to-market and the fair value loss to be recognized in earnings, a capital-constrained firm can improve its capital position by selling the credit-impaired asset even if it has to acce...
August 2011Why Did U.S. Banks Invest in Highly-Rated Securitization Tranches?
with Isil Erel, René M. Stulz: w17269
We estimate holdings of highly-rated tranches of mortgage securitizations of American deposit-taking banks ahead of the credit crisis and evaluate hypotheses that have been advanced to explain these holdings. We find that holdings of highly-rated tranches were economically trivial for the typical bank, but banks with greater holdings performed more poorly during the crisis. Though univariate comparisons show that banks with large trading books had greater holdings, the holdings of highly-rated tranches are not higher for banks with large trading books in regressions that control for bank size. The ratio of highly-rated tranches holdings to assets increases with bank assets, but not for banks with more than $50 billion of assets. This evidence is inconsistent with explanations for holding...

Published: “Why Did Holdings of High - Rated Securitization Tranches Differ So Much Across Banks?” with Isil Erel and Taylor Nadauld, The Review of Financial Studies, 2014, v27(2), 404-453.

March 2011Did Securitization Affect the Cost of Corporate Debt?
with Michael S. Weisbach: w16849
This paper investigates whether the securitization of corporate bank loans had an impact on the price of corporate debt. Our results suggest that loan facilities that are subsequently securitized are associated with a 15 basis point lower spread than that of loans that are not subsequently securitized. To identify the particular role of securitization in loan pricing, we employ a difference in differences approach and consider loan characteristics that are associated with the likelihood of securitization. We document that Term Loan B facilities, facilities originated by banks that originate CLOs, and loans of B-Rated firms are securitized more frequently than other loans. Spreads on facilities estimated to be more likely to be subsequently securitized have lower spreads than otherwise simi...

Published: Nadauld, Taylor D. & Weisbach, Michael S., 2012. "Did securitization affect the cost of corporate debt?," Journal of Financial Economics, Elsevier, vol. 105(2), pages 332-352. citation courtesy of

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